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Monday, February 20, 2012

A bitter capsule from Italian Premier Mario Monti on Job safety–Part I

"Young people will have to get used to the idea of not having a fixed job for life" - Mario Monti, Italian Premier.

It’s not that we don’t know; continuing economic turmoil in US and Europe already showed us how fragile our permanent jobs are. What people didn’t expect is the confirmation of the same by a head of the state.

When I was in college, class rooms were reserved for PSC (Kerala Public Service Commission) exams on Saturday’s. People from all over the state were competing for a few openings in government departments. After all government jobs were considered as the strongest life insurance cover one can have. Even the gulf boom started in the late seventies didn’t alter the status of government employees. It’s true that the rising salaries in the Middle East and IT boom took the sheen off from the government jobs.

Then came 2008 financial crisis - a hard hit on economy. Job security evaporated overnight. In IT sector, people who were jumping from one company to another in a matter of 5-12 months struggled to retain their position. Candidates who cleared all the exams and interviews find themselves again in the examination hall. Companies struggled to honour offer letters. It was not that government jobs were safe; many PSU’s shut down permanently after finding it difficult to compete with foreign companies in ever changing market conditions.

Still the concept of permanent job remains sacrosanct across the world. Even though Monti told that the fixed jobs are monotonous, people hardly changed the career. I am yet to see a bank manager quitting the job because he found it monotonous and boring. Saying is very easy but jump in to the ocean of uncertainty is totally a different ball game. There was an established pattern- study hard in school days, finish graduation from a reputed university, land in a decent job, marry a girl and settle down. After studies some went to their relative’s home in distant cities like Mumbai, Delhi, Pune etc and tried to sew their life together. Many others dared to cross the oceans and land in former Asian Tiger countries or Middle East petro dollar economies. After completing around 40-45 years of service people say good bye to their job and settle down with their family.

But liberalization changed everything. It not only give the people an opportunity to become a tiger, but it also forced them to live a tiger’s life – either hunt hard for living or starve to death. I still remember that sad scene of a tiger’s normal death in one of the wildlife documentary. Welcome to the post modern world!!!

In the late stage of cold war, US workers find their jobs flying to Far-East Asia and East Asia. It was no one’s fault; US companies find the new markets a virgin land to sell their products and for cheap labour. People in East and Far-East Asia recovering from the devastating blow of World War II (WWII) were desperate for securing bread for them and their family. As long as US and European companies were able to scale up their efficiency and skills everything was fine. Various technological breakthroughs helped the companies to raise their operational efficiency as well as profit margin. But there was a revolution going on in the East – in Japan, in Korea, in China, in Malaysia, in Singapore - once the major exporters of the ancient world Asian countries (especially East and Far East) tried to recover their position.

As Deng said, China no longer cared about the colour of the cats; all that matters to them was whether it can catch a mice or not. Slowly they moved higher in the production chain, from the manufacturing of transistors, to PCBs, to microchips; from the position of exporters of primary goods to the one which exports toys to fighter planes.

As the lower end job continued to shift from high to low wage areas, people in higher wage areas started facing difficulties. They had two options - either work hard or enhance their skills. Working hard had its own limitations; this will take you to the next level but going beyond that required corresponding enhancement in the skill set. In the low wage countries also, things was not so good, there were so many people for so little jobs. In the end ‘something better than nothing’ prevailed.

Economic progress increased the wages too. This created another set of problems; companies which posted better results in profit and growth started experiencing squeeze in their margins. They automated whatever they can automate, and job started continued to moving in search of cheaper labour. Thus assignments moved once to Japan from US continued to flow to China then to other countries like Vietnam, Cambodia etc. Automation and technological advances reduced the number of people required to for finishing a project dramatically - an inevitable consequence when the society advances.